Model Surface Use and Mineral Development Accommodation Act

I t is possible for different interests in land to be held or owned by different persons. That is, the same visible geography may be subject to more than one kind of ownership interest. This is because American property law views interests in land as bundles of rights and obligations held by people against or or1 behalf of other people. Real estate law regulates relationships between people fundamentally, and the actual geography is simply the subject of those relationships.

One way to have different interests in different people in the same geography is to have ownership of the surface interests different from ownership of the mineral interests. What are surface interests? They are, is

generally, the r ight to occupy and use the surface of the land in any lawful way - to build on it the lawful structures that are permitted, to rent its occupation and use, and to sell the same, if that is what the surface owner wants t o do.

The mineral interest is more confined. I t is the r ight to remove valuable minerals that are found under t he surface of the land. Implied in that right is the right to enter the geography on the surface and to use that surface in a manner consistent with the right t o remove the minerals below the surface.

I f there is a different owner for the surface interests and for the mineral interests, is there a potential conflict? Of course! The owner or holder of the mineral interests has the r ight to interfere with the surface interest to exercise the mineral ifiterest. With s a n e rare exceptions in the commor; law, the holder o f the mineral interest does not have to compensate the holder of the surface interest for that interference.

I n the United States today, there is considerable land, actual geography, for which the surface and mineral interests are held separately. As the demand for valuable and even semi-valuable minerals (gravel, for example, is a kind of mineral) increases, the potential for conflict increases and has increased.

I n 1990, the Uniform Law Commissioners have promulgated the Model Surface Use and Mineral Development Accommodation Act (MSUMDAA) in an effort to resolve that conflict. I t tries to resolve it by encouraging agreement and accommodation between the holders of the separate interests.

Both the holders of the surface interests and the mineral interests have the power to demand agreement and accommodation over the development of mineral interests. The mineral estate remains, as it is under the common law, the dominant estate. But the owner of the mineral interest can avoid liability to the surface owner only by giving notice of proposed mineral development together with a plan to accommodate existing surface uses or

HI3 790 SUBCOMMTTTEE April 24, 2006

Exhibit 4

improvements. The surface owner may object and subject the proposed development and the plan to a judicial proceeding. I n the proceeding, if the court .finds tha t mineral development is economically, technologically, and economically practicable, and that i t cannot be conducted without injury to the surface use or improvement, or that the surface use or improvement interferes with sound practices of mineral development, then the mineral developer can proceed without any accorr~modation and without liability to the surface owner,

However, i f the court finds no probability of mineral development, or that the surface use or improvement does not interfere with such development, then the mineral developer must accommodate the surface owner and may be liable for damages resulting from that development.

The surface owner also has the power t o give notice to the mineral owner of any surface use or improvement that might need protection from mineral development. I f the mineral owner does not object, there may be liability for injury from any future mineral development. I f there is objection, t he court follows the same pattern of findings described above.

MSUMDAA also determines the damages in the event there is liability for injury to the surface interests. The losses compensated are, generally, the economic losses suffered by the surface owner.

The conflicts between surface and mineral owners continue in a large part of the United States. MSUMDAA can resolve conflicts fairly and without halting necessary mineral development.

UNIFORM LAW COMMISSIONERS'MODEL SURFACE USE AND

MINERAL DEVELOPMENT ACCOMMODATION ACT

Drafted by the

NATIONAL CONFERENCE OF COMMISSIONERSON UNIFORM STATE LAWS

and by it

APPROVED AND RECOMMENDED FOR ENACTMENTIN ALL THE STATES

at its

ANNUAL CONFERENCEMEETING IN ITS NINETY-NINTH YEAR

IN MILWAUKEE, WISCONSINJULY 13 - 20, 1990

WITH PREFATORY NOTE AND COMMENTS

UNIFORM LAW COMMISSIONERS'MODEL SURFACE USE AND

MINERAL DEVELOPMENT ACCOMMODATION ACT

The Committee that acted for the National Conference of Commissioners on UniformState Laws in preparing the Uniform Law Commissioners' Model Surface Use and MineralDevelopment Accommodation Act was as follows:

JOHN L. McCLAUGHERTY, P.O. Box 553, Charleston, WV 25322, Chair GREGORY J. PETESCH,Legislative Council, Room 117, State Capitol,

Helena, MT 59620, Drafting LiaisonOWEN L. ANDERSON, Texas Tech University, School of Law, Lubbock,

TX 79409 JAMES M. BUSH, Suite 2200, Two North Central Avenue, Phoenix,

AZ 85004 TOM R. MASON, University of Mississippi, School of Law, Law

Center, University, MS 38677 JOSHUA M. MORSE, III, Florida State University, College of Law,

Tallahassee, FL 32306 GRANT S. NELSON, University of Missouri-Columbia, School of Law,

Columbia, MO 65211 MARIAN P. OPALA, Supreme Court, Room 202, State Capitol,

Oklahoma City, OK 73105 GLEE S. SMITH, P.O. Box 360, 111 East 8th, Larned, KS 67550 ROBERT E. SULLIVAN, 112 Hillcrest Loop, Missoula, MT 59803 ROBERT E. BECK, Southern Illinois University, School of Law,

Carbondale, IL 62901, ReporterLAWRENCE J. BUGGE, P.O. Box 1497, 1 South Pinckney Street,

Madison, WI 53701, President (Member Ex Officio)WILLIAM J. PIERCE, 1505 Roxbury Road, Ann Arbor, MI 48104,

Executive DirectorPETER K. MUNSON, P.O. Box 1949, Sherman, TX 75091, Chair,

Division G (Member Ex Officio)

Review Committee

RICHARD J. MACY, Supreme Court, Cheyenne, WY 82002, ChairHENRY M. GRETHER, JR., 2508 La Costa Avenue, Carlsbad, CA 92009STANLEY PLETTMAN, 4th Floor, 470 Orleans Street, Beaumont,

TX 77701

Advisors to Special Committee onUniform Law Commissioners'

Model Surface Use andMineral Development Accommodation Act

Clyde O. Martz, American Bar AssociationEdward W. Hieronymus, American Bar Association, Section of Real

Property, Probate and Trust Law

Final, approved copies of this Act and copies of all Uniform and Model Acts andother printed matter issued by the Conference may be obtained from:

NATIONAL CONFERENCE OF COMMISSIONERSON UNIFORM STATE LAWS

676 North St. Clair Street, Suite 1700Chicago, Illinois 60611

(312) 915-0195

4

MODEL SURFACE USE ANDMINERAL DEVELOPMENT ACCOMMODATION ACT

PREFATORY NOTE

This Model Act results from the existence in some parts of the UnitedStates of large areas where mineral estates were severed from surface estatesbut where no known mineral deposits exist or where there is little prospect thatany known minerals will be developed. Because these severed mineral estatescarry appurtenant easements of access through, and use of, the surface formineral development purposes, the existence of the severed mineral estates canhinder development of the surface estates. Both surface owners and moneylenders may be unwilling to risk capital to develop the surface where futuremineral development could disturb the surface development. There are sufficientexamples of a mineral previously thought to be of no value becoming valuable tomake the risk sufficiently real that surface developers must take it into account.

An example of legislative recognition of the need to deal with thisproblem is the Texas Mineral Use of Subdivisions Act of 1983. (Tex. Nat. Res.Code ch. 92 (Supp. 1990)) The Texas act authorizes the Texas RailroadCommission to approve subdivision plats if the plats designate appropriatesurface areas and easements for mineral development. Thereafter if thesubdivision development goes forward, the mineral developer is limited to usingthe designated areas and easements. The purpose statement of the Texas actprovides in part:

It is the finding of the legislature that the rapidly expanding populationand development of the cities and towns of this state and theconcomitant need for adequate and affordable housing and suitable jobopportunities call for full and efficient utilization and development of allland resources of this state, as well as the full development of all theminerals of this state. (§ 92.001)

Other states have taken a different approach to surface development risks andhave enacted statutes that, while not limiting the mineral developer's access,allow surface owners to collect damages for any surface interference or harmthat results from mineral development. Those states and the year of adoptionare as follows: Indiana, 1951; North Dakota, 1975 (coal); North Dakota, 1979;Montana, 1981; Oklahoma, 1982; South Dakota, 1982; West Virginia, 1983;Tennessee, 1984; and Illinois, 1988. However, except for the 1975 NorthDakota act, these acts relate only to oil and gas development.

While the approach adopted in this Model Act is more general than theTexas approach, it does not adopt the approach of the other states either. Instead the Model Act: (1) recognizes the appurtenant easement; (2) adopts theaccommodation doctrine as developed through common law decisions in severalstates for balancing the respective interests of surface and mineral estate owners(see Comment to Section 2); (3) provides mineral developers with anopportunity to get advance approval of mining plans as being in accord with theaccommodation doctrine; (4) provides surface owners with an opportunity toqualify some surface uses or improvements for damages from any interference

5

by mineral development except during ongoing mineral development; (5)recognizes express expansions and limitations on the easement and theaccommodation doctrine; (6) recognizes agreements relating to the duties andrights established under the Act; (7) prohibits injunctions and limits the damagesrecoverable for claims under the Act; and (8) specifies some procedures to befollowed. Finally the Act is supplemental to the common law, equity, and otherstatutory rights and remedies.

6

MODEL SURFACE USE AND

MINERAL DEVELOPMENT ACCOMMODATION ACT

SECTION 1. STATEMENT OF POLICY AND FINDINGS.

(a) The public policy of this State is to maximize the economic, cultural,

and environmental welfare of the people by preserving all reasonable

opportunities for optimum development and use of all surface and mineral

resources. To that end, it is declared that where mineral estates are severed

from surface estates by grant or reservation it is the public policy of this State

to: (i) facilitate responsible development of surface and mineral estates by

quantifying so far as practical the surface and mineral rights and burdens arising

from the severance of the estates; (ii) encourage accommodation of potentially

conflicting interests by agreement; and (iii) provide expeditious procedures for

defining and quantifying rights and obligations of owners of severed estates

whenever uncertainties exist and conflicts arise.

(b) The [legislative body of this State] finds that this public policy can

be pursued without impairment of any constitutionally protected right of owners

of severed estates through the exercise of the state's police power in the manner

provided in this [Act].

(c) The [legislative body of this State] declares that the purpose of this

[Act] is to provide damages as the sole remedy for violations of duties and

obligations provided by this [Act] and not otherwise to limit or restrict the right of

an owner of a severed mineral interest to engage in the development of

minerals. This [Act] does not limit or restrict action upon or issuance of any

permit, license, or approval required under other law for mineral development.

7

SECTION 2. DEFINITIONS. In this [Act]:

(1) "Accommodation" means the exercise of mineral development rights

with due regard for the rights of the surface owner as to surface use and

improvements, if technologically sound and economically practicable alternative

methods of mineral development exist. "Accommodate" has a corresponding

meaning.

(2) "Mineral" means gas, oil, coal, other gaseous, liquid and solid

hydrocarbons, oil shale, cement material, sand and gravel, road material,

building stone, chemical substance, gemstone, metallic, fissionable and

nonfissionable ores, colloidal and other clay, steam and other geothermal

resources, and any other substance defined as a mineral by any law of this State.

(3) "Mineral developer" means the owner of a severed mineral estate or

any lessee or other person who has rights of mineral development.

(4) "Mineral development" means the full range of activity, from

exploration through production and reclamation, associated with the location and

extraction of a mineral which will cause physical damage to the surface. The

term includes (i) processing and transportation of the minerals if those

operations are conducted on the same surface tract from which the underlying

mineral is extracted; and (ii) recovery of any mineral left in residue from

previous extraction or processing operations.

(5) "Ongoing mineral development" means: (i) the continuation of any

mineral development that is being conducted on or under the surface; (ii)

additional mineral development that is identified in a work plan, pooling or

unitization agreement, or other document, that has been approved by an agency

responsible for regulating the mineral development; or in drilling or mining logs

or other records maintained by a mineral developer; or (iii) the resumption or

8

extension of mineral development within 30 years after the previous production

stopped.

(6) "Person" means an individual, corporation, business trust, estate,

trust, partnership, association, joint venture, government, governmental

subdivision or agency, or any other legal or commercial entity.

(7) "Surface" means the exposed area of land, improvements on the

land, subjacent and lateral support for land and structures, and any part of the

underground actually used by a surface owner as an adjunct to surface use, such

as root medium, groundwater, and construction footings.

(8) "Surface owner" means a person who holds an interest of record in

the surface estate or a person in possession of the surface who holds an

unrecorded interest in the surface estate, excluding adverse claimants without

adjudicated title.

(9) Except when expressly stated otherwise, "surface use or

improvement" means an existing or future surface use or improvement.

COMMENT

The definition of accommodation is drawn, in particular, from thelanguage of the Texas Supreme Court in Moser v. U.S. Steel, 676 S.W.2d 99,103 (Tex. 1984), where in the context of dealing with uranium the court refers tothe doctrine as the "'due regard' or 'accommodation' doctrine". Cases that applyor further define accommodation include: Flying Diamond Corp. v. Rust, 551 P.2d509 (Utah 1976); Getty Oil Co. v. Jones, 470 S.W.2d 618 (Tex. 1971); Reading& Bates Offshore Drilling Co. v. Jergenson, 453 S.W.2d 853 (Tex. Civ. App.1970); Getty Oil Co. v. Royal, 422 S.W.2d 591 (Tex. Civ. App. 1968); Gulf PipeLine Co. v. Pawnee-Tulsa Petroleum Co., 34 Okla. 775, 127 Pac. 252 (1912). Thus mineral owners or developers may not impair an existing surface use orimprovement where technologically and economically feasible alternatives fordeveloping the minerals are available to the mineral owner or developer. InGetty Oil Co. v. Royal, 422 S.W.2d 591, 592 (Tex. Civ. App. 1968), the mineraldeveloper sued to prevent the surface owner from installing gates across roadsthat the mineral developer used to access three oil wells and a meter. Themineral developer had constructed the roads and used them in an open condition"for many years" before defendant acquired the tract and built a fence around itwith four gates across the roads. The court upheld the surface owner's conductconcluding that the mineral developer having to get in and out of a vehicle fivetimes rather than once to service a well is not an unreasonable inconvenience.

9

The surface owner had an interest in keeping out trespassers and it was properto instruct the jury to balance the inconvenience to the mineral developer withthe utility to the surface owner. Thus it is not conclusive against the surfaceowner if the alternative methodology costs the mineral developer more. Asanother illustration, a road accessing a mine site may cost more to place at theedge of a farmer's field than it would cost to run it through the middle of thefield, but the added cost may have no significant effect on the overall profitabilityof the venture. The accommodation doctrine is a specific application of thereasonable use aspect of the surface and use access easement recognized inSection 3.

The definition of mineral does not redefine mineral for general purposes. The intent is to cover all substances subject to severance from the surface anddevelopment the way traditional minerals are developed. Sand and gravel aresurface-mined much like coal. Therefore a surface owner facing sand and gravelextraction should be treated the same as a surface owner facing coal extraction. The definition here follows the definition used in the Uniform Dormant MineralInterests Act.

The definition of surface is intended to be broad enough to includeriparian rights and any other property right privileges to use land covered bywater as surface. Thus the owner of a right to wharf out who builds a dock intothe water has a surface improvement in the dock.

SECTION 3. EASEMENT FOR SURFACE ACCESS AND USE ACCOMMODATION.

(a) The separation of a mineral estate with a right of mineral

development from the surface by deed, lease, or other instrument, in the

absence of language in the instrument to the contrary, establishes the mineral

estate as the dominant estate and creates an easement on and through the

surface for reasonable access to the minerals in place and for reasonable use of

the surface in the development of the mineral estate, as defined by other law of

this State.

(b) A surface access and use easement under subsection (a) is subject

only to accommodation to surface uses and improvements and enlargements or

curtailments effected under Section 4, 5, 6, or 8 or by agreement.

COMMENT

Both the existence of the easement and the dominance of the mineralestate are well recognized. The North Dakota Supreme Court recently statedboth:

10

The above cases recognize the well-settled rule that where the mineralestate is severed from the surface estate, the mineral estate isdominant. . . . The mineral estate is dominant in that the law implies,where it is not granted, a legitimate area within which mineral ownershipof necessity carries with it inherent surface rights to find and develop theminerals, which rights must and do involve the surface estate. Withoutsuch rights the mineral estate would be meaningless and worthless. Thus, the surface estate is servient in the sense it is charged with theservitude for those essential rights of the mineral estate.

In the absence of other rights expressly granted or reserved, the rightsof the owner of the mineral estate are limited to so much of the surfaceand such use thereof as are reasonably necessary to explore, develop,and transport the minerals.

Hunt Oil Co. v. Kerbaugh, 283 N.W.2d 131, 135 (N.D. 1979). Conversely, asurface owner is entitled to use the surface to the extent that the surface use isconsistent with the mineral development right. See Reading & Bates OffshoreDrilling Co. v. Jergenson, 453 S.W.2d 853, 855 (Tex. Civ. App. 1970).

While this Act in Section 3(a) declares the existence of the impliedeasement of surface access and use, it does not provide a basis for decidingwhether a particular means of access or a particular use, such as a power line,surface versus underground mining, employee living quarters, and so forth, iswithin the scope of the easement. The Act declares only that parties may byagreement limit or enlarge the access and use and then applies theaccommodation doctrine to whatever access or use is determined to be withinthe scope of the easement. For example, several courts have ruled that whenaccess language in the severance document is consistent with undergroundmining, the mineral developer does not have a right to develop the mineral bythe surface or strip mining method. See, e.g., Skivolocki v. East Ohio Gas Co.,38 Ohio St. 2d 244, 313 N.E.2d 374 (1974); Stewart v. Chernicky, 439 Pa. 43,266 A.2d 259 (1970). Decisions as to what reasonable surface uses exist for themineral developer will continue to be made under the common law of the state.

The Act creates a statutory accommodation doctrine. See Section 2(1)and the Comments thereto for definition. Section 3(b) also makes clear that theaccommodation doctrine as adopted in this Act provides protection for mineraldevelopment and surface uses and improvements as effected under Section 4, 5,6, or 8. Thus under Section 4 a mineral developer may seek to have a mineraldevelopment plan preapproved as to accommodation. Under Section 5 a surfaceowner may seek full protection for a specific use or improvement. Under Section6, mineral owners or developers and surface owners may agree as to the scopeof the accommodation doctrine. Section 8 provides for court action to determinea Section 4 or Section 5 privilege.

Although the following illustrations of subsection (b)(1) refer to surfaceimprovement, they apply as well to surface use. In each instance mining wouldstart after the stated events.

1. O has an improvement on the surface at the time O transfers themineral estate to X without an express waiver of liability for surface

11

damages. Then this Act is passed. O's improvement can be protectedunder the accommodation doctrine as defined in this Act. Therefore, amineral developer must proceed with due regard for the improvement iftechnologically sound and economically alternative methods of mineraldevelopment exist.

2. O transfers the mineral estate to X without an express waiver ofliability for surface damages. Thereafter O, or a successor to the surfaceestate, makes an improvement on the surface. This Act is passed. Theimprovement can be protected under the accommodation doctrine asdefined in this Act. Therefore, a mineral developer must proceed withdue regard for the improvement if technologically sound andeconomically alternative methods of mineral development exist.

3. O transfers the mineral estate to X without an express waiver ofliability for surface damages. This Act is passed. O, or a successor tothe surface estate, makes an improvement on the surface. Theimprovement can be protected under the accommodation doctrine asdefined in this Act. Therefore, a mineral developer must proceed withdue regard for the improvement if technologically sound andeconomically alternative methods of mineral development exist.

The accommodation doctrine as defined allows some injury to or interferencewith a surface improvement or use. However, a surface owner with animprovement as noted in illustrations (1) to (3) may also obtain a right to thedamages allowed under Section 10 for any interference with or injury to theimprovement from mineral development by qualifying the improvement or useunder Section 5.

If in either of illustration 1, 2, or 3, there is an express waiver of liabilityfor surface damages given before the passage of this Act, the accommodationdoctrine as adopted by this Act applies only to the extent application is notinconsistent with the waiver. See Section 6.

SECTION 4. PROTECTION OF MINERAL DEVELOPMENT. If a mineral

developer gives each surface owner notice of proposed mineral development,

together with a plan to accommodate existing surface uses or improvements

protected by Section 3(b) or a plan satisfying requirements for a permit under

federal or state law, the mineral developer is not liable for failure to

accommodate surface uses or improvements affected by the proposed plan

unless (i) a surface owner serves on the mineral developer a written objection to

the plan within 60 days after receipt of notice, challenges the plan by a

proceeding under Section 8 and obtains a favorable determination in the

12

proceeding, or (ii) the mineral developer makes material deviations from the plan

which result in material injury to surface uses or improvements entitled to

protection under the accommodation doctrine.

COMMENT

Under the implied right to make a reasonable use of the surface, thecourts held that the mineral developer was not liable for damages when themineral developer was making a reasonable use of the surface. See Reading &Bates Offshore Drilling Co. v. Jergenson, 453 S.W.2d 853, 854-55 (Tex. Civ. App.1970). Thus under the accommodation doctrine which grows out of thereasonable use limitation, the mineral developer is not liable to the surface ownerfor damages that result when there is no violation of the doctrine.

It was possible under the common law for a mineral developer to get apre-mining determination of reasonable use and to enjoin a surface owner frominterfering with the reasonable use. See, e.g., Hunt Oil Co. v. Kerbaugh, 283N.W.2d 131 (N.D. 1979). This section specifically allows the mineral developerto obtain a determination that its mineral development will be consistent with theaccommodation doctrine. If the mineral developer obtains the determination andconforms its operation to the plan so approved, it will be insulated from liabilityunder this Act for violation of the accommodation doctrine. See Section 8(d).

Section 7 provides the form for any notice or objection to be given underthis Act. If a notice or objection does not conform substantially to that form itdoes not constitute notice or objection under this Act. Additionally, underSection 9 the notice or objection must be recorded. Notices provided to surfaceowners by mineral developers as a result of the requirements of other statutes,for example SMCRA, do not trigger this section. The only interrelationshipbetween this section and other statutes is that the mineral developer may useplans developed under the other statutes to meet the informational aspects ofthis section when the mineral developer chooses to invoke this section.

Sections 4 and 5 necessarily are mutually exclusive to the extent thatone or the other is exercised.

SECTION 5. PROTECTION OF SURFACE USE OR IMPROVEMENT.

(a) A surface owner who desires protection for a proposed surface use

or improvement may give the mineral developer notice of the use or

improvement. The mineral developer is subject to a claim for damages for any

injury that subsequent mineral development causes to the use or improvement

unless there is ongoing mineral development or the mineral developer makes a

13

written objection to the proposed use or improvement to the surface owner

within 60 days after receipt of the notice.

(b) If the mineral developer makes a written objection on the surface

owner pursuant to subsection (a), the surface owner may gain protection for the

proposed use or improvement only by (i) entering into an agreement with the

mineral developer, or (ii) obtaining a determination in a proceeding under

Section 8 that there is no probability of future mineral development or that

technologically sound and economically practicable mineral development can be

conducted without material injury to the surface use or improvement.

COMMENT

Under the implied right to make a reasonable use of the surface, thecourts held that the mineral developer was not liable for damages when themineral developer was making a reasonable use of the surface. See Reading &Bates Offshore Drilling Co. v. Jergenson, 453 S.W.2d 853, 854-55 (Tex. Civ. App.1970). Thus under the accommodation doctrine which grows out of thereasonable use limitation, the mineral developer is not liable to the surface ownerfor damages that result when there is no violation of the doctrine. However, it isthis very right to use the surface without payment for surface damage that canimpede surface development.

This section allows a surface owner to seek full protection for a use orimprovement except when there is ongoing mineral development. Section 7provides the form for any notice or objection to be given under this Act. If anotice or objection does not conform substantially to that form it does notconstitute notice or objection under this Act. Additionally, under Section 9 thenotice or objection must be recorded. If a surface owner successfully pursuesprotection under this section, the surface owner will be entitled to the damagesas measured in Section 10 for any injury to a protected surface use orimprovement even if the injury would not have been recognized as a violation ofthe accommodation doctrine. See Section 8(c).

This section is not available to a surface owner during a period ofongoing mineral development. The notion is that once mining has started, thesurface owner should not be able to change the rules while that mining isongoing. This applies also to mining that has been identified in the type of plansnoted in the definition before the surface owner invokes this section. The keyhowever is not the continuation of mineral development but rather thecontinuation of the existing mineral development or that identified in the plan. Obviously the surface owner needs to be on notice of the plan for it to enter intothe surface owner's consideration in invoking this section.

14

If the surface owner does not pursue protection under this section at thetime that the opportunity to do so first arises, the surface owner risks losing thelack of probability of future mineral development as a ground for protecting thesurface use improvement. This is because under Section 8 probability isdetermined only as of the time of the proceeding and not as of the time of theinception of the surface use or improvement.

Sections 4 and 5 necessarily are mutually exclusive to the extent thatone or the other is exercised.

SECTION 6. MODIFICATIONS OF EASEMENT FOR SURFACE ACCESS AND

USE. An easement for surface access and use and the obligation to

accommodate are subject to (i) any provision of a deed, lease, or other

instrument which expressly requires payment of surface damages, or waives

surface damages, or protects surface improvements constructed before or after

severance occurs or the obligation to accommodate arises; and (ii) any

agreement relating to surface use or improvement or damages.

COMMENT

In Section 6(i) the Act recognizes expansion of or limitations on thesurface access and use easement and on the accommodation doctrine containedin past or future deeds, leases, or similar documents if the expansion orlimitation is express. Thus, for example, broad form mineral deeds andreservations do not waive damages unless damages are expressly waived inaddition to the broad form rights of access and use. Otherwise this section doesnot declare the validity of these expansions or limitations but assumes that theyare valid under contract and property principles. If invalid, they would have norelevance to this Act. In Section 6(ii) the Act recognizes that the mineral owneror mineral developer and surface owner may come to an agreement on how tocarry out the rights and obligations of this Act.

Although the exceptions in Section 6 are recognized by the Act and canserve to limit the scope of the Act, the exceptions are otherwise extraneous tothe Act. Any remedies for their violation would be through proceedings pursuedseparate and apart from proceedings specified in this Act.

This section does not abrogate any duty impose by any other statute ofthe state.

SECTION 7. PROCEDURES FOR NOTICE AND OBJECTION. A notice or

objection to a surface owner or mineral developer is sufficient if it is in writing

15

and delivered with a return of service or mailed with return receipt requested.

The notice must state the time for objection and the address to which an

objection in writing may be mailed or delivered. The notice must be

accompanied by a description of the mineral development or the surface use or

improvement and a copy of this [Act].

COMMENT

A failure to conform substantially to the notice or objection procedure orform contained in this section would render the notice or objection ineffectiveunder this Act. No other remedy for notice failure is provided in this Act.

SECTION 8. DETERMINATION WHETHER ACCOMMODATION IS REQUIRED.

(a) If the surface owner and mineral developer are unable to reach an

agreement under Section 4 or 5, either party may institute an appropriate

proceeding.

(b) If it is determined in the proceeding that (i) mineral development in

the foreseeable future is probable based upon reasonably foreseeable economic

conditions and technology and that technologically sound and economically

practicable mineral development cannot be conducted without material injury to

the surface use or improvement, or (ii) that the proposed surface use or

improvement would interfere materially with technologically sound and

economically practicable mineral development, the mineral developer may

exercise the development easement appurtenant to the mineral estate without

accommodation for the proposed surface use or improvement and is not liable

under this [Act] for damages to the proposed use or improvement.

(c) If it is determined in the proceeding that (i) there is no probability of

mineral development in the foreseeable future, based upon reasonably

foreseeable economic conditions and technology, or (ii) the proposed surface use

or improvement would not interfere materially with technologically sound and

16

economically practicable mineral development, the mineral developer may

exercise the development easement appurtenant to the mineral estate only with

accommodation for the proposed surface use or improvement and is liable under

this [Act] for damages to that use or improvement. If the determination under

this subsection authorizes a new use or improvement, and the surface owner

does not begin the proposed use or construction of the proposed improvement

within three years after the determination, the mineral developer is thereafter

relieved from the obligation to accommodate the proposed surface use and

improvement and is not liable under this [Act] for damages to the proposed use

or improvement.

(d) The issues specified in subsections (b) and (c) are the sole

substantive issues for determination in the proceeding. A court may not enjoin

mineral development or surface use or improvement under this [Act].

(e) The court shall award to the prevailing party reasonable attorney's

fees and other expenses incidental to the proceeding.

COMMENT

What constitutes an appropriate proceeding will depend on the law ofthe state. For example, it might be a declaratory judgment proceeding, a civilproceeding, or a proceeding in arbitration.

When a specific approved use is not instituted within three years, themineral developer is absolved from accommodating that use under this Act;however, the developer is not absolved from accommodating any existing usesthat are ongoing. Those uses simply do not have the additional protectionaccorded under Section 5.

However, if the use or improvement is instituted, the duty toaccommodate will extend to the life of the use or improvement unless providedotherwise in the decree of the decision-maker under this section. A mineraldeveloper could seek equitable relief on the basis that the life of the use orimprovement is over.

The limits in this Act on injunctive relief apply only to claims provided forby this Act. Therefore, injunctive relief as available in equity for actions outsidethis Act is not affected by the Act. Similarly injunctive relief provided for in other

17

statutes that apply to mineral development is not affected by this Act. SeeSection 11.

While a surface owner may abandon an approved use and seek approvalof a different use, after several abandonments and approvals of different uses, acourt may want to be sure that the surface owner is pursuing bona fide plansrather than simply instituting actions to harass the mineral owner or developer.

SECTION 9. RECORDATION.

(a) The written notice and written objection required by Sections 4 and

5 must be recorded in each county in which the affected land is located.

(b) A deed, lease, instrument, agreement under Section 6, or a

determination under Section 8, may be recorded in each county in which the

affected land is located.

SECTION 10. MEASURE OF DAMAGES FOR FAILURE TO ACCOMMODATE -

LIMITATIONS.

(a) If a mineral developer fails to accommodate a surface use or

improvement protected under this [Act], the surface owner may maintain a civil

action to recover damages for:

(1) loss of surface use limited to the greater of (i) loss of income for

any interrupted period of use of the surface or improvements under the

accommodation doctrine, or (ii) loss of value of the use of the surface or

improvements during any period of interrupted use; and

(2) injury to or destruction of surface improvements limited to the

lesser of (i) the loss of fair market value of the improvement, or (ii) the cost of

repairing, relocating, or replacing the improvements.

(b) A mineral developer may offset the value of any required

reclamation activity or any benefits conferred on the property as a result of

18

mineral development against the amount of aggregate damages for loss of

surface use and destruction of or injury to surface improvements.

(c) An action to recover damages under this section may not be

commenced more than two years after the loss is or should have been

discovered by the surface owner, but the parties by agreement may modify or

waive the period of limitation.

COMMENT

This section applies only to damages awarded under this Act. SeeSection 11.

In subsection (b) royalty received by the surface owner would not be abenefit received; however, a royalty agreement may be entered into as a methodof compensating for damages and if the agreement so specifies will be anagreement under Section 6(ii). An improved access road for the surface ownerwould be an example of a type of benefit that might be conferred by the mineraldevelopment.

SECTION 11. RIGHTS PRESERVED. Except as specifically modified by this

[Act], this [Act] does not limit liability of the surface owner under other law for

impairment or obstruction of mineral development or correlative remedies of the

mineral developer, or liability of the mineral developer under other law for

unreasonable or excessive use of the surface or correlative remedies of the

surface owner.

COMMENT

In Heikkila v. Carver, 416 N.W.2d 593, 596 (S.D. 1987), the courtsummarized the possible bases for surface owner damage actions:

Moreover, apart from liability based on either a surface damage clauseor the theory of unreasonable surface use, liability can also be based ontheories of tort law or breach of statutory duties.

"Where liability is found to exist based on negligence, the remedy iscompensatory damages. Additionally, in cases of wanton disregard of theinterests of the surface owner, punitive damages may be awarded." Turner v.Kaufman, 237 Kan. 184, 699 P.2d 435, 439 (1985). All causes of actionavailable at common law, whether based on obstruction, excessive orunreasonable use, negligence, nuisance, malicious or intentional misuse,

19

contract, other recognized grounds and all causes of action conferred by otherstatutory law are preserved.

The limits in this Act on injunctive relief apply only to claims provided forby this Act. Therefore, injunctive relief as available in equity for actions outsidethis Act is not affected by the Act. Similarly injunctive relief provided for in otherstatutes that apply to mineral development is not affected by this Act. SeeSection 11.

This Act does not limit duties placed on mineral developers under otherstatutes as, for example, SMCRA and Oil and Gas Conservation Acts.

SECTION 12. SHORT TITLE. This [Act] may be cited as the Model Surface

Use and Mineral Development Accommodation Act.

SECTION 13. SEVERABILITY CLAUSE. If any provision of this [Act] or its

application to any person or circumstance is invalid, the invalidity does not affect

any other provision or application of this [Act] that can be given effect without

the invalid provision or application, and to this end the provisions of this [Act]

are severable.

SECTION 14. EFFECTIVE DATE. This [Act] takes effect

_________________________.

SECTION 15. REPEALS. The following acts and parts of acts are amended or

repealed:

(1)

(2)

(3)